While small businesses represent over 90% of businesses banks continue to struggle with building relationships and lending profitably, Bank reticence has opened up a major growth opportunity to Private Equity investors and alternative lenders. FIC assists banks in understanding this segment and how to organize internally to maximize the profit opportunities it offers. We also continue to work with alternative lenders on their approaches to distribution and segmentation and related areas.
Middle Market Banking
Many banks are reemphasizing the lower and core middle market segments, sometimes due to their frustration with the performance of their small business group. However, the approach required for middle market success differs substantially from small business tactics. Relationship Manager (RM) productivity remains a key issue with bankers continuing to spend too much time on non-revenue generating activity. We work with banks on diagnosing their current situation and providing specific recommendations aimed at creating a sustainable competitive advantage while increasing RM sales performance. This may include issues related to job redesign, metrics, compensation, and other areas.
Serving corporate clients requires a substantial degree of product sophistication and a solutions oriented RM staff. In many cases the client staff possesses at least as much sophistication as the RM. What’s required for success includes product excellence, proactive marketing, and a detailed understanding of current and future needs.
Banks serving this market must exploit a team-based approach to underwriting and customer service in order to allow the RM sufficient time to diagnose and address client needs. Job redesign and RM upgrading are often critical components at the best banks.
Financial Institutions now have the opportunity to partner with third parties that will allow them to gain fast and cost effective access to new capabilities and business areas. Banks can work with partners in multiple areas, among them: to provide a digital customer experience, introduce new consumer and/or small business products, access sophisticated analytics or artificial intelligence expertise. FIC works with banks to help set priorities and select the optimal partner to meet near-term needs and longer-term goals.
We also work with Fintech companies related to their distribution models, strategies, and partnership approaches whether focused on lending, technology platforms , or other areas.
Commercial Finance/Equipment Finance
FIC has worked in virtually every aspect of commercial finance from factoring and inventory finance to equipment finance and leasing. As banks pursue revenue growth and focus on differentiating themselves many are finding equipment and asset based finance as likely growth areas. They involve the introduction of a new culture to the overall commercial bank, one that can enhance the sales culture. Our work in this area includes assisting banks in selecting the appropriate operating platform for their leasing business, conducting segmentation and growth analysis, determining cross-sell opportunities, and developing detailed strategic plans.
For many banks, branch systems, once drivers of bank profitability, have become albatross-like, with many branches now generating losses. While higher rates will improve performance, the timing for that rate turnaround may be far away, while near-term losses continue to pile up. At the same time at many banks branch transactions are declining 5-10% annually. Over the next five years no other area provides greater challenges than retail banking with its volatile economics, shifting customer base, increased regulations, and non-bank competitive threats. Many customers expect branch access as they also expect access to the latest technology-dependent channels, increasing cost to serve but not necessarily translating into bank revenues.
FIC works with banks to assess their branch structures to determine each location’s current and expected revenue potential, establishing clear priorities for closure, consolidation, and, in some cases, expansion. Working with our Big Data analytics partner we establish objective criteria that bank management can apply to its branch footprint and make specific recommendations concerning each branch.